Challenges faced by start-up while seeking funds
A start-up can be successful on the grounds of original and unique products as well as such a business structure which strive for innovation. Having a rock solid business idea is not just enough for the start-ups to survive. However in order to sustain, start-up needs a balanced flow of resources in the form of money which is crucially required in the initial stages.
A start-up requires funding for a better technology experience, for hiring the human resources and for induction of a good marketing strategy to get a hold in the market. But most of the start-ups face challenges in securing the funding initially. As per the research most of the 20% of the start-ups fail in the very first year and 50% in the 5th year, reason being regular flow of cash funding.
Today Start-ups are eventually there in every possible field but in order to get funding they face challenges as it involves convincing power in order to make investors believe that your idea has a scalable growth. Investors would most likely to invest in those business which they find sustainable in the coming years.
Fortunately funding issue can be prevented if proper research about it in the very beginning is initiated. Keeping this in mind, Following are the few challenges which are most commonly used by the start-up.
Here are a few most common financial challenges you might face once you start your business.
1. Acquiring funds for development of business
Before starting a business, pre-planning is a must. In the initial days of your start-up, each loan or funding you seek either make your business or breakdown your business. This is the main reason which requires you to be very vigilant. Funding differs according to the business growth and requirements.
For example- Bank loan is one of the most widespread options of funding available for the start-ups but for that you must have a good credibility and must be eligible for the certain conditions which are very difficult to get fulfilled for most of the start-ups. Even if you have clean credit history sometimes banks take up good amount of time starting from weeks to months for processing of the loan application and even after waiting for so long, it’s their decision whether to approve the loan or not. However in that case you can consider alternative funding options available such as crowdfunding where you can get finance at a shorter notice.
2. Poor cash flow
Cash flow is the utmost priority for every business irrespective of the size or nature of the business. The reason being that in order to grow and to distribute the resources liquidity is required. The basic formula to estimate the cash flow is the total income minus total expenses. If the cash flow comes out to be positive it shows you have liquidity and have profitability position. On the other hand if the cash flow comes out to be negative it means the alarming situation. In order to curb that poor cash flow situation business policy must be changed which might involve getting payment in advance or getting half of the payment before the work starts. If you ask for full payment before work then it might get the clients driven away.
3. Sales are increasing, but the profit is insufficient
There are different types of business expenses so it is quite difficult to understand where most of the expenses go. It shows if the sales are rising, but the profit is dropping, this indicates that there might me some wastefulness of expenses or some unknown costs that which can be controlled.
Following are the ways by which you can prevent such hidden expenses or overspending:
- Have a good policy of purchase to make sure that you’re getting the good quality of materials at the most economical price.
- Review the expenses on regular intervals and define the purchases to be made within a stringent budget.
- Regularly review or supervise the business policies, order system.
- Choose your vendors wisely and go through the old agreements or contracts for negotiation.
4. Poor Financial Control
For new businesses, building a complete business plan is a must. It will help to keep on track that how money is being spent and to lessen all the major financial risks. However, supervising all the day-to-day finances can be too traumatic and time-consuming process which can prevent you from focusing on other important aspects of your business progress.
To manage your finances in a better way, you must be familiar with the fundamentals of accounting, such as understanding and evaluating your financial statements. On the other hand, doing all this by hand is a massive time waste. In order to overcome this, you could spend in a cloud accounting platform which will help to automate the accounting efforts and achieve your target within a specified budget. All this can be done either in house or one can get a help from a professional.
It can be concluded that despite the challenges start-ups should try to overcome all the hurdles in order to sustain in the long run. It is rightly said that success cannot be achieved overnight, and every business faces numerous challenges before it became the popular brands.
For further queries please contact us on: Email Id Swati@neusourcestartup.com and Phone Number 9540026175.
The NeuSource Startup Mind is the finest business startup consultant that offers various services of registration like Proprietorship Firm Registration, Partnership Firm Registration, LLP Registration, Company registration, GST Registration, Copyright Registration, ISO Registration Trademark registration and other FSSAI License etc.
CS Vaishali Verma
Ideas are easy but Implementation is hard. If you're seriously passionate about something and you work hard, then I think you will be successful. Neusource helps you to make your start up successful.